Crisis Management

Crisis Management

Article excerpt

Crisis Management

Because crises arrive in many forms and almost always as surprises, the term crisis management describes a broad range of managerial challenges. One increasingly common crisis comes from the threat of takeover. At a meeting of the National Association of Corporate Directors, D. George Harris described his experience at SCM Corporation, which he had been made president and chief executive officer (CEO) of just one month before a serious takeover bid by Hanson Trust. "It was one of the most traumatic and grueling four-and-a-half months of my life," he said. "It was an experience that left me exhausted and benumbed, left several close colleagues on the beach, left employees shaken and confused, and left the company as we all knew it, gone."

A different kind of crisis may arrive, however, through a failure of product or process or even from a perfectly sound product that has been contaminated by another. Crises may arise through computer breakdowns or other equipment failures, while still others come from human failures or a breakdown of ethical standards.

The most common crisis faced by managers, however, is the urgent need for a financial turnaround. The company has experienced a serious negative cash flow. Sales are sluggish, the market share is declining, expenses are out of control, and employees--who often comprehend the gravity of the situation and its causes more clearly than top management--are demoralized. Ample indicators may have existed that should have sounded loud alarms in the minds of management but have been ignored.

Often a financial crisis may appear to have been caused initially by outside factors, but on closer inspection the critical factor was complacent and incompetent management. Rarely can a manager or CEO right a rapidly failing company before it hits bottom and is demolished. New management is almost always required to replace those who created the crisis. The first step, therefore, in a successful turnaround is a change of top management.

Realizing the organization has practiced self-destructive behavior, the turnaround manager or CEO must understand why it did so. He or she must investigate not only the proximate cause of the damage but also the kind of plan and assumptions behind the plan. …